Saturday, May 21, 2011

The Empire Speaks

GW's CEO has responded to the questions about the new Trade Terms. His response can be seen at the GW farcebook page. It is nice for him to respond to the uproar about the new terms. His basic point is that local retailers (GW or Trade) support the hobby by recruiting and events while the internet sales just freeload on this expensive endeavor. This is a fundamental issue in current gaming retail world but really does not have much to deal with the actual issue here.

The UK resellers should not be able to deliver the products at a profit to AU at half the cost of what GW charges if GW was running a rational operation in AU. Shipping should be about the same. GW disadvantage is that more than likely the import duty and taxes of about 15% are probably not being paid. I have heard comments that AU has high duties but for most things it is 5% if you are not getting accused of dumping which GW certainly could not be at its prices. GW AU or the local stores should probably file some complaints with AU customs about that but by having the retail cost very high they make this worse on themselves. Ofcourse this also affects NZ which does not have duties. As a note the AU customs and taxes appear to be lower than the 20% UK VAT.

Do the AU rogue traders have better wholesale rate if the cost of business is so high there or the standard 50% of retail cost? I doubt it. I am sure the retailers would like the product to have a lower retail price. They would not like a price drop but since this difference was 4 years in the making they could have just not got the annual price increases that the rest of the world got. We all know that this is not a product that you buy just what you need plus a little extra like food or gas. We buy essentially as much as we can afford as addicts. How many players do you know who have just that 1 completed army and how many do you know that have 2-5 armies all in various stages of completion from painted to MIB.

Tac squad is 23 pounds so (11.5 cost to retailer) and is 62 AU dollars (31 from retailer which is like 20 pounds at the current rate(.66)). So GW is essentially saying that it costs them twice as much to deliver this product in AU than in UK. If this is actually the case they really need to get to work on their logistics. I think UPS has a service for that. Back when the exchange rates were .4 pounds per AU dollar they were delivering at a cost of like 12.4 pounds so like 3 extra AU dollars for the tac squad at the wholesale level so the wholesale price should now be like 17.5 plus 3 so about 20.5 AU dollars or like 41 retail cost. So that cut the cost down by like 33% which really closes that gap and would probably have allowed them to maintain their local sales volume. You could still do better online but it would not be the huge gap it is now.

This problem really goes back to the dual nature of the company. Are you a manufacturer or a retailer? If your stores are really a marketing tool should you be expecting them to make a profit or just to break even. Are they an affective marketing tool since they make up probably 75% of the cost of the company? Could you spend a quarter of that and still make the same profit through sales through just independent stores? Sure independent store sales bring less cash but they also have lower costs. You say that the Stores are your wall against the competition but you cut their hours and service to levels where they cannot run demo games with one man stores. You move them from high visibility areas to strip malls. Should not your wall against your competition be the quality and value of your products. Would a happy customer base serve you better as a recruiting tool and more importantly retention tool? You spend so much money recruiting players with this retail chain while appearing to have very little interest in long term customer loyalty.